Tuesday, March 9, 2010

Legislation extending unemployment insurance for the long-term jobless faces a key test vote in the Senate, its momentum helped by about 60 popular tax breaks for individuals and businesses that expired at the end of last year.

The measure also prevents doctors from absorbing a crippling cut in Medicare payments, extends health insurance subsidies for the unemployed and gives cash-starved states help with Medicaid, the federal-state program providing health care to the poor and disabled.

The unemployment insurance alone - to provide weekly unemployment checks averaging above $300 to people whose core 26-week benefit package has run out - will cost $66 billion through December. In some states people are eligible to receive benefits for up to 99 weeks.

The bill, and the test vote today, demonstrate the difficulty Democrats face as they focus on jobs. It doesn't include new ideas for boosting jobs, but instead reprises elements of last year's $862 billion economic stimulus bill, which is earning mixed reviews from voters. Simply extending those provisions has produced a far more expensive measure than a separate so-called jobs bill that Democrats hope to soon send to President Barack Obama. That measure would boost highway spending and give tax breaks to companies that hire the unemployed and could clear the Senate for Obama's desk this week.

At a gross cost of about $148 billion, Tuesday's measure illustrates the extraordinary cost of the unemployment safety net as the economy inches out of the recession. Democrats say the unemployment benefits inject demand into the economy and say renewing the tax cuts helps preserve existing jobs.

The measure closes $29 billion of tax loopholes to help defray its cost, including one enjoyed by paper companies that get a credit from burning "black liquor," a pulp-making byproduct, as if it were an alternative fuel.

All told, the measure would add $107 billion to the deficit over the coming decade. Democrats have labeled most of the bill an emergency measure, exempting it from stricter budget rules enacted just last month.

Democrats need to muster at least one Republican vote Tuesday to reach the 60-vote threshold needed to limit debate and guarantee an up-or-down vote. But Sen. Susan Collins, R-Maine, provided crucial help last week to keep the measure out of another procedural tangle, and Democrats sound confident they will prevail.

The bill includes about 60 popular tax breaks for individuals and businesses that expired at the end of 2009. The bill would extend the tax breaks through 2010, at a cost of about $26 billion.

Congress routinely extends the tax breaks each year with large bipartisan majorities. Businesses and tax planners would prefer a more permanent solution, but lawmakers can't agree on how to pay for a longer extension.

The tax breaks include a property tax deduction for people who don't itemize, lucrative credits that help businesses finance research and development and a sales tax deduction that mainly helps people in the nine states without income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming.

There is a deduction for college tuition for couples making less than $160,000 a year, and one for teachers who use their own money to buy school supplies. There is a tax credit for community development agencies that invest in low-income neighborhoods, as well as a tax break for restaurant owners and retailers who remodel their stores.

The expiration of one tax break, a $1 per gallon credit for the production of biodiesel, has already caused "a pretty substantial blow to the industry," said Michael Frohlich, a spokesman for the National Biodiesel Board. The credit would cost $1 billion to extend for the rest of the year.

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